Barrick Posts Big Net Loss Due to $4 Billion Write-Down

gold bars nuggets
gold bars nuggets

Barrick Gold Corp. (NYSE: ABX) reported fourth-quarter and full-year 2012 earnings before markets opened this morning.

For the quarter, the gold miner posted adjusted earnings per share (EPS) of $1.11 on revenues of $4.19 billion. In the same period a year ago, the company reported EPS of $1.38 on revenues of $3.76 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.06 and $3.9 billion in revenues.

On an IFRS basis, the company posted an EPS loss of $3.06, compared with EPS of $1.17 in the fourth quarter of 2011. The net loss is the result of a $3.8 billion impairment charge in the Barrick's copper business.

For the full year, Barrick posted adjusted EPS of $3.82 compared with EPS of $4.67 in the previous year and a consensus estimate of $3.85. Revenues for the year totaled $14.55 billion, up from $14.26 in 2011 and ahead of the consensus estimate for revenues of $14.17 billion.

Jamie Sokalsky, the company's CEO, said:

Rising costs, poor capital allocation and the pursuit of production growth at any cost in the industry have led to declining equity valuations across the sector. The message is clear: the industry must chart a new path forward. Barrick highlighted the need for change last year, and we are increasingly taking strong action and re-focusing our business based on the principle that returns will drive production, production will not drive returns.

Barrick offered guidance for 2013 in a range of 7 million to 7.4 million ounces of gold and 480 million to 540 million pounds of copper. The forecast for total cash costs rises from $584 per ounce of gold in 2012 to a range of $610 to $660 per ounce. The company's cash costs for copper production are expected to be in the $2.10 to $2.30 per pound range, compared with the 2012 cost of $2.17 per pound.

In the fourth quarter, Barrick produced 2.02 million ounces of gold and 130 million pounds of copper. The average realized gold price was $1,714 an ounce and the average realized copper price was $3.54 a pound.

Barrick's impairment charges and write-downs are something we will see a lot more of in this earnings season. Rio Tinto PLC (NYSE: RIO) took a $14 billion charge this morning on its aluminum business, and Kinross Gold Corp. (NYSE: KGC), Newmont Mining Corp. (NYSE: NEM) and BHP Billiton Ltd. (NYSE: BHP) are also expected to take significant charges in 2012.

Barrick's shares are trading up about 0.8% this morning, at $31.85 in a 52-week range of $31.00 to $50.02. The consensus target price for the shares was around $49.10 before today's report.

Filed under: 24/7 Wall St. Wire, Commodities & Metals, Earnings Warning Tagged: ABX, BHP, KGC, NEM, RIO